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South Australia has taken control of Sanjeev Gupta’s Whyalla steelworks and forced it into administration over unpaid bills and alleged under-investment, threatening to further destabilise a global metals empire already beset by creditor lawsuits and criminal probes.
The state government rushed through legislation on Wednesday, amending the Whyalla Steelworks Act, which dates back to the 1950s, to allow the state to access the company’s accounts and give it first charge over its debts.
In a move it said would secure the industry’s future in the region, the government appointed KordaMentha as administrator of the company that owns the steelworks, as well as nearby iron ore mines and a deep water port.
The action could have significant ramifications for Gupta and his global steel empire GFG Alliance, which has been battling numerous legal claims that were filed by creditors after the collapse of its main lender Greensill Capital in 2021.
Gupta is being criminally prosecuted in the UK for failing to file accounts for scores of his businesses. GFG Alliance has also been under investigation from the country’s Serious Fraud Office for nearly four years. Gupta is defending himself against these charges and GFG denies any wrongdoing.
Gupta said last week GFG had struck a deal with creditors that would entail selling a coal mine in New South Wales and using the funds to settle its debts and invest in Whyalla, which has previously propped up other parts of GFG’s global operations.
Peter Malinauskas, South Australia’s premier, said on Wednesday that the move to push the steelworks into administration was “undoubtedly unusual and unorthodox” but was the best route to preserve steelmaking in the region.
He said he was not prepared to bail out GFG due to the risks involved.
“If we bailed out GFG, or gave GFG a big sum of money, we would have to be satisfied that we would actually achieve that aim. That is to say, the money wouldn’t end up somewhere else, or that it would be the final amount,” he said. “We just couldn’t abide that risk.”
Malinauskas said the government was forced to intervene as the financial situation at the Whyalla steelworks was becoming “irredeemable” and that GFG had not made the required investments into the operations. “We couldn’t have GFG holding back steelmaking in this country,” he said.
GFG Alliance said it was “assessing what this means and is seeking advice on its options. Our concern is first and foremost the wellbeing and safety of our employees.”
Its Australian business was once considered the crown jewel of Gupta’s global steelmaking operations, but a lengthy shutdown of the Whyalla blast furnace last year due to damage, and a collapse in global demand for steel due to higher Chinese exports, pushed the business into a loss.
Gupta said in an interview with The Australian last week that the business was at “death’s door” in December, but he expected it to break even by mid-2025.
However, local politicians have expressed concern that the company has been trading while insolvent, with payments to suppliers and the government in arrears. The state-owned water company is owed A$15mn (US$9.5mn).
Gupta was seen as a “white knight” bidder for the Whyalla business in 2017 when he bought it out of administration for A$700mn and pledged to invest heavily in modernising the steelworks.
He was initially hailed as a hero in the remote town, once home to BHP’s shipbuilding business, but anger has built over the past year as local contractors — from engineering firms to laundromats — have been forced to stand down staff due to unpaid bills.
Malinauskas said this month the government was owed “tens of millions of dollars” by the steelworks and last week pulled its support for a A$600mn hydrogen facility due to be built to supply the GFG steelworks with energy.
The premier will fly to Whyalla and announce a new funding package on Thursday, alongside Australian Prime Minister Anthony Albanese.
Tim Buckley, an analyst at think-tank Climate Energy Finance, said it was time to “lance the boil” at Whyalla by putting it into administration as under-investment in the steelworks during GFG’s ownership meant operations had been “run into the ground”.
He said Gupta’s plans to sell off a coal mine to pay off creditors were “delaying the inevitable”.
“The move by the South Australian government to put Whyalla into administration is brave and critically important to prevent further erosion of the business,” he said.
GFG separately owns steel recycling business InfraBuild in Australia. While the company was long one of the most profitable parts of Gupta’s empire, performance has recently sagged and the company is late filing its accounts.
Additional reporting by Robert Smith in London
